01 January 2000

CONCERN THAT the public is failing to grasp the risks inherent in income-generating investments has prompted the Financial Services Authority to launch a review of advertising for high income funds and corpo-rate bond unit trusts.

‘Headline returns’ for such funds can be risky and are not comparable with ordinary savings accounts, the FSA warned. It is interviewing older investors to establish their perceptions of such products, many of which are selling like hot cakes due to current low interest rates on savings accounts and promises of a ‘guaranteed income’. Many ads relegate to six-point type the unpalatable fact that the sum invested can diminish if the market falls.

Dependent on the review’s findings, the FSA may amend its rules to ensure that advertisements are ‘fair, clear and not misleading.’ Says Christine Farnish, FSA director of consumer relations: ‘[We are] particularly concerned that consumers may not be aware that by investing in these products they could be putting their capital at risk. They should not be taken in by the headline income - suggestions that this is fixed or protected can be confusing, with the small print often revealing that this is only the intention of the provider.’